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Engineers see light

WA engineering companies see the early signs of a recovery in resource investment that could end the deepest and most prolonged slump in the past quarter of a century.

After a decade in which many billions of dollars were spent on new projects, the past two years have been devastating for the vigorous engineering sector that developed in Perth.

Chamber of Commerce and Industry chief economist Nicki Cusworth, estimates activity fell away by at least 70 per cent, leading to widespread retrench-ments and the closures.

The new wave of investment is tantalisingly, just out of reach, but she believes the beginnings of a recovery will occur next year.

Construction of the third phase of the North West Shelf’s LNG project, expected to begin within the next six months, will fill many local engineering workshops with orders.

Preliminary work on the West Angelas iron ore mine has begun, although the estimated $1 billion capital investment in this, could be greatly reduced following the Rio Tinto’s takeover of North Ltd.

If the new owners decide not to build a second railway to the coast, the investment will be almost halved.

Early indications are that the remaining elements of the project – the mine, expansion at the port and other facilities – will not be delayed.

Other projects, in steel, nickel and other minerals are also promising, but Ms Cusworth warns these will come only just in time; if a recovery does not occur soon, WA may lose the ability to fill new contracts as key personnel leave the State, and companies close.

However, she said all signs were promising, with higher commodity prices, particularly for the products from this State, continued strength in Asia (subject to anxiety over higher oil prices) and particularly bright prospects for oil and gas.

The slump in resource investment has meant WA’s economic growth has been subdued. For the first time in perhaps two decades, it has lost its place as the fastest growing State in Australia.

While medium to long term forecasts suggest it will regain this position, executives of local engineering companies are more concerned about the outlook for the next six months.

RCR Tomlinson is an example of how a medium-sized engineering company faced the crisis, and is recovering. It was forced to reduce its workforce from 550 to 350 but is now moving back towards the 450 level, with about $60 million in work likely this year.

This is a big improvement on last year’s figure of $47 million, and close to the pre-slump turnover of $70 million.

Managing director John Linden said the severe decline in the resource industries demanded great flexibility if a company was to survive.

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